Fear, Desperation and Doom Describe the Housing Market

Posted at 8:17 AM (CST) by & filed under Greg Hunter, USAWatchdog.com.

(Courtesy of Greg Hunter of www.USAWatchdog.com)

Dear CIGAs,

It has been called foreclosure gate, robo signing, foreclosure fraud or just sloppy paperwork; but no matter what you call it, it’s signaling a new financial meltdown for the U.S. economy.  The securitized mortgage debt created in the real estate bubble is being called the “largest fraud in the history of capital markets” by people like renowned gold expert Jim Sinclair.  The big banks packaged mortgages into securities (mortgage backed security) and then sold them to pension funds and investors.  The mortgages in these securities had to meet what is called “contractual representation and warranties.”   That basically means the bank had to legally be able to prove it owned the property it was selling in the security.  Once more, the mortgage applications and appraisals were required to be free of fraud.  The “robo signing” is all about creating paperwork that proves the banks owned the property in the “security” and the mortgage was done correctly.  In millions of mortgages, the banks either can’t find or do not want to produce the original paperwork with the borrowers signature  (promissory note).   Now, investors want to force the banks to buy back trillions in mortgage backed securities that have lost value.   In a recent interview on MSNBC, Congressman Brad Miller said, “. . . in almost every contract if they (the MBS’s) weren’t what they were contractually required to be, the bank had to buy them back.  That’s probably more than they could buy back and we may be back where we were two years ago.”  (Click here for the entire MSNBC interview with Rep. Miller.)

Two years ago, Treasury Secretary Hank Paulson warned Congressional leaders we were just days away from a complete “meltdown of our financial system, with all the implications here at home and globally.”  I think we will be getting to that point again and soon.  Sinclair says, “Securitized mortgage debt is going to be the final shot that kills all kinds of financial entities in the Western world.”  (Click here for the complete Sinclair post at JSMineset.com.)

Some in federal and state government are calling for a moratorium in all foreclosures across the entire country.  CNBC recently reported, “40 States to Launch Probes Into Foreclosure Mess.”  The story goes on to say, “The attorneys general of up to 40 states plan to announce soon a joint investigation into banks’ use of flawed foreclosure paperwork.”  (Click here for the complete story.)  Wall Street is sending up warning flares that the economy could be damaged even more if foreclosures are stopped.  (Many banks have already stopped foreclosures in some states.)  According to a Reuters story, “The Securities Industry and Financial Markets Association said foreclosure processing mistakes should be fixed but said dramatic nationwide action could unjustly impose losses on the investors who help provide credit to the $11 trillion U.S. mortgage market.  “It is imperative…that care be taken in addressing these issues to ensure that no unnecessary damage is done to an already weak housing market and, in turn, that there is no further negative impact on the economy,” SIFMA Chief Executive Tim Ryan said in a statement.”  (Click here for the complete Reuters story.)